The rights stuff
Soccer scores big in new media
Pay TV is traditionally driven by movies and sports -- as the success of Blighty's Rupert Murdoch-backed satcaster BSkyB will attest.
But digital competition is making the value of movie rights questionable with viewers able to access movies in so many different ways.
In Europe, the battle over the new media space is being fought on the soccer pitch.
That battle is, arguably, fiercest in Italy and Spain where soccer, known as the beautiful game, is powering an ugly fight between Italo Prime Minister Silvio Berlusconi's broadcast group Mediaset and Murdoch's Sky Italia, and between Spain's newbie digital webs.
ITALY
Italian soccer rights are negotiated by team rather than by league, as in France, England and Germany. Now smaller clubs from top league Serie A are pitting themselves against giants such as Juventus, Inter Milan and Berlusconi's A.C. Milan.
Bickering burst into a championship boycott threat by 14 teams after Mediaset inked a whopping E248 million ($300 million) all-rights deal for the 2007-2009 seasons with Juventus in December and a similar $223 million deal with Inter at the end of January.
The fear is that single deals of such magnitude will leave smaller clubs with the crumbs.
The mayhem is due to Mediaset, which sells pay-per-view soccer to Italians with a digital terrestrial decoder via a unique prepaid card, and has recently also leaped into mobile TV through a pact with Telecom Italia.
"Generally soccer is what first lures viewers to a new platform," says media analyst Augusto Preta, prexy of Rome's Italmedia research group.
Murdoch's Sky Italia is forbidden to ink all-rights deals by European Union regulators, which in 2003 gave News Corp. the go-ahead to become Italy's single pay TV player on condition it buy soccer rights for satellite only.
Sky Italia is getting sweet revenge when it comes to World Cup coverage. It outbid RAI in 2004, forking out $47 million for rights to the 64 games, 39 of which are exclusive.
This will be the first year Italians won't see the entire tourney free on RAI -- which sparked calls for locals to withhold the pubcaster's annual $120 TV tax.
SPAIN
Spain's a late starter in TV. Its first commercial broadcasters didn't launch until 1990, and its final two analog webs were authorized in July.
Spain's World Cup bidding war is being driven more by these startups' need to consolidate market presence than sophisticated pay TV strategies.
Cuatro, a terrestrial free TV subsid of pay TV leader Sogecable, launched Nov. 7. Backed by Mexico's Televisa and Spanish production house Arbol-Mediapro, La Sexta launches in the spring.
Per reports, La Sexta has bid $108.7 million for World Cup rights, Sogecable $90.6 million, pubcaster RTVE somewhat less.
Even if real figures are lower, the networks are still going out on a limb.
From its 1997 launch through 2004, Sogecable failed to turn a profit despite snagging Spanish and European Champions League rights for its satcaster subsid Digital Plus.
Rights to the opening game, the final and five games that include the Spanish team are worth roughly $30 million in ad revs, says Luis Fananas at Deutsche Bank.
Sexta's World Cup transmissions are stymied by the fact it transmits to only 70% of Spaniards, and these will have to adjust sets to receive the signal.
Cuatro has no such problems -- and access to World Cup games would place it squarely on viewers' radar.
FRANCE
Sports rights holders have taken advantage of the fact that France is the only European country with competing payboxes; they've played Canal Plus against rival TPS (jointly owned by TF1 and web M6). For instance, in 2004, Canal Plus paid more than $760 million for French first-division soccer rights -- the most for local soccer anywhere in Europe.
To rein in such costs, however, Canal and TPS intend to merge.
Undeterred, sports rights holders are turning to new distribution platforms.
France's leading mobile phone operator, Orange recently signed a $35 million-per-year deal for exclusive mobile broadcast rights for first and second division soccer for the 2006 to 2008 seasons --more than triple what it paid at the last auction.
But while league soccer is a cash cow in France, the World Cup is more of a gamble.
TF1 made a costly bet in 2001, buying exclusive rights to the 2002 Cup as well as the cream of the 2006 matches, for $201 million. That went sour in 2002, when France was eliminated in the first round.
Estimates as to the profitability of World Cup rights vary. Some studies say TF1 could make $108 million in ad profits, while others estimate the French team would have to reach the semifinals for the channel to break even.
GERMANY, U.K.
Unlike the pay TV frenzy for top division soccer in Germany and the U.K., both countries' broadcasters are more egalitarian over the World Cup.
In Germany, pubcasters ARD and ZDF will share coverage, and in Blighty, pubcaster the BBC and its commercial rival ITV will do the honors.
In 2004, ARD and ZDF acquired terrestrial TV rights to the top 2006 World Cup soccer matches for $240 million from Swiss-based sports agency Infront.
The ARD and ZDF deal includes the live broadcast of 48 of the 64 games, including the opening match, all German games, quarterfinals, semifinals and final.
That's a far cry from the $120 million ARD and ZDF paid now defunct Kirch Media for 26 live matches in the 2002 Cup.
Back then, Kirch gave live matches to its paybox Premiere, which helped boost the subscriber base but, ultimately, could not stop Premiere from hemorrhaging red ink. Ironically, it was Kirch that went bankrupt in 2002; its sports rights assets were picked up by Infront.
Premiere, which depends on soccer to drive subs, will carry all World Cup matches on pay TV.
In the U.K., soccer coverage is arguably the key driver for Europe's biggest pay box, BSkyB.
But the World Cup is a government-protected event, which means only free-to-air broadcasters can transmit live coverage.
ITV and BBC jointly paid between $209 million and $261 million for the rights to the 2002 and 2006 World Cups.
ITV and the BBC are keeping mum about any new media coverage they are planning. The BBC has pioneered interactive viewing with the Wimbledon tennis tournament and the Athens Olympics.
Nick Vivarelli in Rome, John Hopewell in Madrid, Liza Klaussmann in Paris, Ed Meza in Berlin and Steve Clarke in London contributed to this report.
